Consolidated’s Udell: We’re winning back business customers from cable

Ethernet network

Consolidated Communications is aware that cable operators are getting aggressive selling to business customers, but it is finding many of them are returning to the telco after not getting the experience they wanted.

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Bob Udell, CEO of Consolidated Communications, told investors during its third quarter earnings call that the advantage the telco has over cable is that it provides deeper management of the services. 

“Cable companies continue to be our primary competitors and they have been pretty aggressive with pricing in the very small business area, and their success has been where we see customers that are most price sensitive,” Udell said. “Having said that we have adjusted some of our bundles and as cable companies have deployed their consumer-like products for businesses, we tend to win some of those customers back because of the quality of service prioritization we have built into voice and the other traffic.”

Along with providing better QoS, Consolidated’s efforts to expand its Ethernet and cloud offerings as well as offering a solutions approach is resonating with business customers.

“The metro Ethernet and cloud services layered on continue to be something that differentiates our offering and our shift to a solutions-based sales approach, which we transitioned in the first quarter, allowed us to grow our position there,” Udell said.

Business services overall continued to be a highlight in Consolidated’s results as the telco reported that it grew commercial and carrier data and transport revenue by 5.2 percent year-over-year.

Driven by growth in Metro Ethernet, Consolidated’s data connections revenues were $49.7 million, up from $47.2 million in the third quarter of 2015. Total commercial revenue was $78.2 million.

A key contributor to Consolidated’s third quarter business services growth was its acquisition of Champaign, Illinois-based CTC Communications. Since completing this acquisition, Consolidated has begun to offer CTC’s customers its new cloud products and some enhanced network operation center (NOC) and network surveillance options.

By acquiring CTC, Consolidated gained 310 new on-net lit fiber buildings, ending the quarter with a total of 5,497 buildings. The telco also now has a total of 14,099 fiber route miles, up from 13,830 in the same period a year ago.

Consolidated spent $31.9 million in capital investments and continues to expand its fiber network.

Having a greater density of on-net fiber buildings means that Consolidated can better control the customer experience while having a pipe into business locations it can use to layer on not only Ethernet, but also cloud-based services.

Udell said that while a portion of its data connections revenues growth was from the CTC acquisition, “the way to think about it is we're continuing to see the Metro Ethernet drive a lot of the growth there.” He added that if “you look at the lit building counts, that's driving a lot of the Metro Ethernet growth.”

In particular, Consolidated is seeing the highest demand for Metro Ethernet services with four main verticals: Universities, school districts, financial and healthcare. The service provider was awarded a new $10 million, 5-year contract to deliver dedicated fiber facilities and Ethernet services.

“These types of contracts have historically led to new opportunities, including upgrades over time,” Udell said.

As it continues to expand its fiber reach, Consolidated is seeing further gains in its wholesale carrier business, selling fiber-based services to wireless operators. During the quarter, Consolidated signed agreements with wireless operators for 22 new fiber-to-the-tower sites, bringing its total under contract to 1,280 towers.

“With the SureWest and Enventis acquisitions, CNSL is further deepening its fiber centric reach,” said Jennifer Fritzsche, senior analyst for Wells Fargo, in a research note. “In our view, the company represents a unique story in the telecom industry today with rich fiber assets but strong and steady RLEC cash flow.”

From an overall financial perspective, Consolidated reported total revenue of $191.5 million, down from $194 million in the same period a year ago. Consolidated noted that growth in strategic revenues were offset by declines in legacy voice revenues, network access and subsidy step-downs from CAF-II and Texas USF support.